COVID-19 general insurance losses range from $32 billion to $80 billion across key classes in U.S. and U.K., says Willis Towers Watson - Seite 2

The U.K. insurance industry, for example, has already started discussions with Pool Re, the U.K. government-backed terrorism reinsurance pooling arrangement, to provide pandemic cover. Similarly, the French government has set up a working group to investigate how insurance for black swan events can be provided in the future. This highlights how governments are looking to the insurance industry to help provide both expertise in this difficult circumstance as well as future risk transfer mechanisms.

The report also estimates the potential offset effect on U.S. and U.K. motor classes. Where an insurer has a large motor book, especially in the U.S., it’s expected that social distancing policies, which reduce the total number of miles driven, will mean a material drop in incurred claims. This will enable significant premium rebates, which Willis Towers Watson also estimates in the various scenarios.

“Based on our Moderate scenario, we estimate a potential drop in U.S. personal auto losses of $40 billion relative to expectations going into 2020,” said Christopher Bozman, senior director, Willis Towers Watson. “However, premium rebates given by auto insurers already may exceed $10 billion and could continue to grow. The ultimate extent of rebates is highly uncertain and will depend on insurers’ reactions to emerging data related to frequency reductions.”

Portfolio management is an area of increasing focus, where top-quartile organizations manage their portfolios by engaging in forward-looking management, not just reacting post-event. According to Willis Towers Watson, events such as COVID-19 further reinforce the need for effective portfolio management.

“As the world heads towards a recession, the length of which in our scenarios ranges between six months and three years — with falling payroll, GDP, global trade and travel — it has never been more important for insurers to perform a strategic assessment of their portfolios,” said Richard Clarkson, head of London market consulting, Willis Towers Watson. “Expected reductions in premium income opportunities, combined with changing risk profiles, will challenge any insurer’s pre-COVID-19 business plans. We see strategic portfolio management as a major area of focus to achieve adequate returns, and indeed profitable growth, over the next three years.”